E-Commerce

Taiwan's iPads Are Free. The Cases Cost $1,000

In Taiwan, a good way to find deals on electronic gear is to troll online auction sites. For example, on a Yahoo! (YHOO) Auctions page run by a seller named Tsang, one deal stands out among the Samsung smartphones, Bose sound systems, and hundreds of other products on display: an iPad case for NT$33,000 ($1,063). Although that's about 2,600 percent more than what Apple (AAPL) charges for the same case on its U.S. website, by local standards it's not a bad price. That's because if you buy the case, Tsang, who would only provide her surname, will throw in a free iPad with 3G wireless and 64 gigabytes of memory. She says the case is her hottest item.

Selling iPads in Taiwan is illegal, so gray marketeers are giving them away with the purchase of absurdly marked-up accessories. It's like selling a set of tires for $50,000 and including a BMW at no extra charge. The country's National Communications Commission, which issues licenses for all wireless devices, has yet to approve the tablet. It's perfectly fine to bring iPads into the country if they were bought elsewhere, however. Tsang and more than a dozen enterprising auction-site sellers figure that gives them a loophole: As long as they charge for the case and not the thing that goes inside it, they figure they're not breaking the law.

Actually, they are breaking the law, says Tseng Shian-kang, a public-relations official at the NCC, though he adds that the commission has no plans to prosecute. (According to the NCC, Yahoo is legally in the clear. "We follow government regulations and patrol the site," says Sophia Cheng, a spokeswoman for Yahoo in Taiwan.)

Consumers bought 7.9 million iPads worldwide through the end of September, according to investment bank Janney Capital Markets. Tim Cook, Apple's chief operating officer, has said the Cupertino (Calif.)-based company is selling them "as fast as we can make them." (Apple declined to comment for this story.) Rather than exacerbate supply problems by offering the iPad in all countries at once, Apple has been rolling the device out in phases. Last quarter the tablet became available in Singapore and China. At some point, iPads will go on sale in Taiwan, too. "Apple submitted their application in August and we're still processing it," says the NCC's Tseng. "We don't know when it'll be approved."

None of the sellers contacted by Bloomberg Businessweek would give their full names or specify where they get their iPads. Yahoo! Auctions seller Richard, who is offering a free 16 gigabyte iPad to purchasers of a $704 camera connection kit that goes for less than one-twentieth the price in the U.S., says his supply came as gifts from friends overseas. Another seller on Yahoo! Auctions named Chen ($1,038 case, 64 gigabyte Wi-Fi-only iPad) isn't saying anything at all. "Reporters, don't ask me about the iPad," reads the large bold type on his Yahoo! Auctions profile. "I am not selling iPads, I am selling iPad cases. And my cases are more high-class."

The bottom line: IPad sales are illegal in Taiwan until Apple's license is approved—so gray marketeers are giving them away with marked-up accessories.